Financial News

Virgin Mobile USA Reports $98 Million in Adjusted EBITDA Excluding Transition and Restructuring Expenses(1) for the First Six Months of 2009

Hybrid Gross Customer Additions Increase 20% Year Over Year in the First Half of 2009

WARREN, NJ, Aug 10, 2009 (MARKETWIRE via COMTEX) -- Virgin Mobile USA, Inc. (NYSE: VM), a leading national provider of
wireless communications services, today reported its financial and
operational results for the three and six months ended June 30, 2009.

Second quarter 2009 highlights:

Net service revenue of $290.0 million compared to $293.8 million in
the second quarter of 2008

Adjusted EBITDA of $43.9 million compared to $32.3 million in the
second quarter of 2008, up 36%; Adjusted EBITDA excluding transition and
restructuring expenses was $45.0 million compared to $33.4 million in the
second quarter of 2008, up 35%(1)

Net income of $21.8 million compared to net income of $5.5 million in
the second quarter of 2008, up 296%

Earnings per diluted share of $0.23 compared to $0.07 in the second
quarter of 2008, up 229% year over year; Adjusted earnings per diluted
share of $0.27(1); compared to earnings per diluted share of $0.08(1) in
the second quarter of 2008, up 238%

First half 2009 highlights:

Net service revenue of $608.1 million compared to $600.8 million in
the first half of 2008

Adjusted EBITDA of $93.4 million compared to $61.0 million in the
first half of 2008, up 53%; Adjusted EBITDA excluding transition and
restructuring expenses was $97.6 million compared to $62.1 million in the
first half of 2008, up 57%(1)

Net income of $40.9 million compared to net income of $10.3 million in
the first half of 2008, up 299%

Earnings per diluted share of $0.42 compared to $0.16 in the first
half of 2008, up 163% year over year; Adjusted earnings per diluted share
of $0.51 compared to $0.17 in the first half of 2008, up 200%(1)

Free cash flow of $29.0 million compared to $29.2 million in the first
half of 2008

(1) Excludes transition and restructuring expenses related to the
acquisition of Helio, the outsourcing of IT services to IBM and
workforce reductions totaling $1.2 million and $4.2 million for the
three and six months ended June 30, 2009, respectively and $1.1
million for the three and six months ended June 30, 2008. Adjusted
earnings per share also excludes the amortization of intangibles
associated with the acquisition of Helio. Adjustments to earnings per
share are net of noncontrolling interest and taxes.

"Our financial results in the first half of the year have exceeded
our expectations," said Dan Schulman, Chief Executive Officer, Virgin
Mobile USA. "We grew Adjusted EBITDA excluding transition and
restructuring expenses by 57% to $98 million in the first half of
2009, producing Free cash flow of more than $29 million. We continue
to exceed our financial expectations and remain confident in our
guidance for Adjusted EBITDA and Free cash flow for the full year
2009."

"Our stated strategy is to focus on growing our highly profitable
hybrid customer base. We made strong progress against this goal in the
second quarter. Hybrid gross adds grew from 55% of total gross adds in
Q1 to 63% in Q2, resulting in 20% year over year growth in total
hybrid gross customer additions in the first half of 2009," continued
Schulman. "The growth of our hybrid customers, who have more than 15x
the lifetime value of our average pay-by-the-minute customers, has
been supported by the launch of our new service plans throughout the
second quarter. Our new $49.99 Unlimited offer has been particularly
successful, representing 21% of all gross adds in May and June. We
expect continued hybrid growth with the plans now fully deployed into
retail in Q3.

"Supporting this strategic customer focus is the sale of
higher-priced handsets, which are associated with higher data usage,
better churn, and significantly higher lifetime value. Our sales of
handsets priced at $50 and above leapt to 25% of total sales from 15%
in just one quarter, reflecting the success of our strategy and our
commitment to high quality growth."

Overview and Basis of Presentation

Financial results for Helio are included in Virgin Mobile USA's
results beginning on August 22, 2008. This press release uses several
financial performance metrics, including Adjusted EBITDA, Adjusted
EBITDA margin, Average Revenue Per User (ARPU), Cash Cost Per User
(CCPU), Cost Per Gross Addition (CPGA), Free cash flow, Adjusted
EBITDA excluding transition and restructuring expenses and Adjusted
EBITDA margin excluding transition and restructuring expenses,
Adjusted EPS excluding the amortization of intangibles associated
with the acquisition of Helio and Adjusted EPS excluding the
amortization of intangibles associated with the acquisition of Helio,
and transition and restructuring expenses which are not calculated in
accordance with generally accepted accounting principles in the
United States, or GAAP. The Company believes that these non-GAAP
financial metrics are helpful in understanding its operating
performance from period to period and, although not every wireless
company uses these metrics or defines these metrics in the same way,
the Company believes that these metrics as used by Virgin Mobile USA
facilitate comparisons with other wireless service providers. These
metrics should not be considered substitutes for any performance
metrics determined in accordance with GAAP. For a reconciliation of
non-GAAP financial measures, please refer to the section entitled
"Definition of Terms and Reconciliation of Non-GAAP Financial
Measures" included at the end of this release.

During the second quarter of 2009, Virgin Mobile USA's net service
revenue was $290.0 million, down 1% versus the same period in 2008.
Virgin Mobile USA's net service revenue in the first half of 2009 was
$608.1 million, up 1% compared to $600.8 million in the first half of
2008. Net service revenue in the second quarter was impacted by
customer optimization as customers migrated to lower priced plans,
including migrations to our new $49.99 unlimited plan. These
migrations of higher-priced unlimited customers to the new unlimited
plan are expected to be completed by the end of the year. Net service
revenue in the second quarter was also impacted by the ongoing
consumer shift from minutes to messaging, which was offset by growth
in data revenue. Data revenue in the second quarter of 2009 was 22%
of net service revenue, up from 18% in the second quarter of 2008.

Adjusted EBITDA in the second quarter of 2009 was $43.9 million
compared to $32.3 million in the second quarter of 2008, up 36%.
Adjusted EBITDA excluding transition and restructuring expenses in
the second quarter of 2009 was $45.0 million, an increase of 35%
compared to Adjusted EBITDA excluding transition and restructuring
expenses of $33.4 million in the second quarter of 2008. Adjusted
EBITDA margin was 15.1% in the second quarter of 2009, up from 11.0%
in the second quarter of 2008. Adjusted EBITDA margin excluding
transition and restructuring expenses was 15.5% in the second quarter
of 2009, up from 11.4% in the second quarter of 2008.

Adjusted EBITDA in the first half of 2009 was $93.4 million compared
to $61.0 million in the first half of 2008, up 53%. Adjusted EBITDA
excluding transition and restructuring expenses was $97.6 million, up
57% compared to $62.1 million in the first half of 2008. Adjusted
EBITDA margin excluding transition and restructuring expenses was
16.0% in the first half of 2009, up from 10.3% in the second quarter
of 2008. Virgin Mobile USA's strong profitability and margin
improvements in the second quarter and first half of 2009 benefited
from the Company's goal of focusing on high-quality customer
additions, which provide fewer but significantly more profitable
gross customer additions. Adjusted EBITDA in the second quarter and
first half of 2009 also benefited from cost-cutting initiatives
implemented in the second half of 2008 and lower per unit network
costs. The Company's new plans launched during the second quarter
are performing well, with 21% of all gross customer additions
adopting the $49.99 unlimited voice plan in May and June, compared
with 3% average adoption of the previously available unlimited plan.

Virgin Mobile USA's net income in the second quarter of 2009 was
$21.8 million, up 296% from net income of $5.5 million in the second
quarter of 2008. Net income in the first half of 2009 was $40.9
million, up 299% compared with $10.3 million in the first half of
2008. Adjusted earnings per diluted share excluding amortization of
intangible assets and transition and restructuring expenses were
$0.27 in the second quarter of 2009 compared to $0.08 in the second
quarter of 2008. Earnings per diluted share in the second quarter of
2009 benefited from planned cost efficiencies in the business,
including improved per unit network costs. Virgin Mobile USA's
profitability in the first half of 2009 also benefited from a 38%
reduction in net interest expense when compared with the first half
of 2008, which was partly the result of repayments to outstanding
debt related to the acquisition of Helio.

Free cash flow totaled $29.0 million in the first half of 2009,
compared to $29.2 million in the first half of 2008. The Company
continues to experience positive Free cash flow due to ongoing cost
efficiencies implemented in the business, and expects to grow full
year Free cash flow in the range of 75% to 114% year over year.
Capital expenditures in the first half of 2009 were $7.6 million
compared to $9.4 million in the first half of 2008.

In 2008, Virgin Mobile USA acquired Helio and, in conjunction with
the acquisition, made changes to its capital structure, including a
significant reduction in the Company's outstanding debt, which the
Company believes improved its structure and outlook. Net interest
expense in the second quarter of 2009 was $5.1 million, down 35% from
$7.9 million in the second quarter of 2008. For the first half of
2009, net interest expense was $10.7 million, down 38% from $17.3
million in the first half of 2008. Net debt has decreased from $255
million as of December 31, 2008 to $230 million as of June 30,
2009(1).

John Feehan, Chief Financial Officer of Virgin Mobile USA, commented,
"We are executing well against our 2009 strategy to grow Adjusted
EBITDA, Free cash flow, and high quality hybrid customers. I am
particularly pleased with the strong culture of cost discipline we
have instilled throughout the organization, which contributed to the
53% growth in Adjusted EBITDA in the first six months of 2009."

Gross customer additions (or new Virgin Mobile USA customers who
activated their accounts) during the second quarter of 2009 totaled
535,558, compared to gross customer additions of 728,370 in the
second quarter of 2008. The year over year decline in gross customer
additions was a result of intensified competition and the Company's
strategic focus on high lifetime value customer acquisition. During
the second quarter, Virgin Mobile USA reduced the volume of lower
priced handsets in its sales channels, which resulted in fewer, but
higher value, gross customer additions. Gross customer additions of
hybrid plans in the first half of 2009 grew 20% compared to the first
half of 2008.

Virgin Mobile USA's cost per gross addition (CPGA) for the second
quarter of 2009 was $113.65, compared to CPGA of $113.38 in the second
quarter of 2008. CPGA for the first half of 2009 was $108.82 compared
to $114.53 in the first half of 2008. CPGA in the first half of 2009
reflects cost efficiencies in sales and marketing, as well as
continued handset cost improvements.

The Company's cash cost per user (CCPU) for the second quarter of
2009 was $12.12, compared to $11.87 in the second quarter of 2008.
CCPU in the first half of 2009 was $12.46 compared to $12.05 in the
first half of 2008. CCPU in the second quarter of 2009 was higher due
to the continued growth of our hybrid plans as well as an increase in
usage associated with Helio. CCPU in the second quarter and first
half of 2009 included approximately $1.2 million and $4.2 million,
respectively, in transition and restructuring expenses, an increase
from $1.1 million in the second quarter and first half of 2008.

Churn, or average monthly customer turnover, for the three months
ended June 30, 2009 was 5.3%, a 30 basis point improvement over the
same period in 2008. Customer churn is seasonally highest in the
second quarter as the Company begins to experience turnover from the
fourth quarter holiday selling season, which has traditionally been
Virgin Mobile USA's strongest quarter for gross adds. As of June 30,
2009, Virgin Mobile USA had approximately 5.0 million customers.

Average revenue per user (ARPU) for the second quarter of 2009 was
$18.98, down 3% from ARPU of $19.49 in the second quarter of 2008, and
a decrease of 5% from $20.08 in the first quarter of 2009. ARPU for
the first half of 2009 was $19.54 compared to $19.82 for the first
half of 2008, down 1%. The decline in ARPU was a result of
accelerated migrations of our $79.99 unlimited customers to our new
$49.99 unlimited offer, launched during the quarter. While these
immediate price downs have a near-term impact to ARPU as customers
migrate, Virgin Mobile USA expects this to be more than offset by
broader adoption of these high ARPU plans going forward. The $49.99
unlimited offer represented 21% of gross customer additions in May
and June, and these customers have an initial ARPU of approximately
$56. ARPU in the second quarter was also affected by the ongoing
wireless industry trend of the replacement of voice minutes with
messaging. The average monthly messaging rate at Virgin Mobile USA
grew by 4% in the second quarter of 2009 over the first quarter of
2009. In the second quarter of 2009, data was 22% of total net
service revenue, compared to 18% in the second quarter of 2008. Early
in the second quarter, Virgin Mobile USA launched its innovative new
"Texter's Delight" plans, one of which offers unlimited texting for
$19.99 with 10-cent voice minutes. The adoption of these plans is
trending well and these customers are showing significantly higher
ARPUs and margins than our traditional pay-as-you-go customers.

Outlook

Full Year 2009

Virgin Mobile USA's strategic focus on high-quality customer growth,
along with its strong cost discipline, have led to a strong financial
performance thus far in 2009. The Company remains confident in its
guidance for both Adjusted EBITDA and Free cash flow for the full
year 2009.

Recent highlights

-- Launched our first product extension in Broadband2Go, the first
prepaid nationwide broadband device being offered exclusively at Best Buy
Mobile.
-- Announced the Company's first annual rock festival being offered with
a twist - tickets will be free. The event, "Virgin Mobile FreeFest," will
take place on August 30, 2009 and feature Blink 182, Weezer and Franz
Ferdinand, among other acts. An extensive "Free I.P." program has also
been established, providing the now "free'd out" tickets to people who
register and volunteer at a homeless youth shelter.
-- Introduced a new Samsung handset, the Mantra.
-- Debuted Opera Mini and Connect, two new features on no-annual-contract
phones that were previously only available on contract handsets. Opera Mini
provides a rich mobile Internet experience; Connect allows customers to add
and log-in their social networking sites to see all updates on a dashboard.
Both of these are designed to improve the overall customer experience.
-- Launched "Totally Unlimited Calling for $49.99" and our innovative new
"Texter's Delight" plans, offering unlimited texts with 10-cent voice
minutes for $19.99.
-- Introduced the only unemployment plan in the wireless industry, with
"Pink Slip Protection" offering three months of free service to our
eligible customers who lose their jobs while using our services, subject to
certain conditions.
-- Improved contract plans for families, adding $175/month All-In plan
with 4,000 shared anytime minutes that include unlimited messaging and data
services; a $50 A La Carte plan that includes 600 shared anytime minutes
with unlimited mobile-to-mobile calling; and an additional 200 shared
anytime minutes added to the current $100/month A La Carte plan.
-- Launched Google Maps on select prepaid phones.

Earnings Conference Call

Virgin Mobile USA will host a conference call Monday, August 10, 2009
at 8:00 A.M. (EDT) with access available via Internet and telephone.
Investors and analysts may participate in the live conference call by
dialing 1-888-354-3598 (toll-free domestic) or 1-706-643-8861
(international); passcode: 19184676. Please register at least 10
minutes before the conference call begins. A replay of the call will
be available for one week via telephone starting approximately two
hours after the call ends. The replay can be accessed at
1-800-642-1687 (toll-free domestic) or 1-706-645-9291
(international); passcode: 19184676. The webcast will be archived on
Virgin Mobile USA's web site after the call at
http://investorrelations.virginmobileusa.com/.

Virgin Mobile USA is known for its award-winning customer service,
with more than 90% of its customers reporting satisfaction. Virgin
Mobile USA service recently announced its Pink Slip Protection
program, which provides eligible monthly plan customers who lose
their jobs and become eligible for state unemployment benefits free
service for up to three months*. Its full slate of smart, stylish and
affordable handsets are available at approximately 40,000 top
retailers nationwide and online at http://www.virginmobileusa.com/,
with Top-Up cards available at almost 150,000 locations. Virgin
Mobile USA also offers unlimited all-in contract plans with advanced
devices like the Ocean 2.

*Subject to certain terms and conditions

Safe Harbor Statement

This press release contains certain forward-looking statements and
information relating to us that are based on the beliefs of our
management as well as assumptions made by, and information currently
available to, us. These statements include, but are not limited to,
statements about our strategies, plans, objectives, expectations,
intentions, expenditures, and assumptions and other statements
contained in this document that are not historical facts. When used
in this press release, words such as "anticipate," "believe,"
"estimate," "expect," "intend," "plan" and "project" and similar
expressions, as they relate to us are intended to identify
forward-looking statements. These statements reflect our current
views with respect to future events, are not guarantees of future
performance, and involve risks and uncertainties that are difficult
to predict. Further, certain forward-looking statements are based upon
assumptions as to future events that may not prove to be accurate.
Many factors could cause our actual results, performance or
achievements to be materially different from any future results,
performance or achievements that may be expressed or implied by such
forward-looking statements. The potential risks and uncertainties
that could cause actual results to differ from the results predicted
include, among others, those risks and uncertainties discussed in our
filings with the Securities and Exchange Commission, or SEC, copies
of which are available on our investor relations website at
http://investorrelations.virginmobileusa.com/ and on the SEC website
at http://www.sec.gov/. We neither intend nor assume any obligation
to update these forward-looking statements, which speak only as of
their
dates.

This earnings press release includes several historical key
performance metrics used in the wireless communications industry to
manage and assess our financial performance. These metrics include
gross additions, churn, net customer additions, end-of-period
customers, Adjusted EBITDA, Adjusted EBITDA margin, Average Revenue
Per User, or ARPU, Cash Cost Per User, or CCPU, Cost Per Gross
Addition, or CPGA, Free cash flow, Adjusted EBITDA excluding
transition and restructuring expenses, Adjusted EBITDA margin
excluding transition and restructuring expenses, Adjusted earnings
(loss) per share excluding the amortization of intangibles, and
Adjusted earnings (loss) per share excluding the amortization of
intangibles, and transition and restructuring expenses. Trends in key
performance metrics such as ARPU, CCPU and CPGA will depend upon the
scale of our business as well as the dynamics in the marketplace and
our success in implementing our strategies. These metrics are not
calculated in accordance with generally accepted accounting
principles in the United States, or GAAP. A non-GAAP financial metric
is defined as a numerical measure of a company's financial
performance that (1) excludes amounts, or is subject to adjustments
that have the effect of excluding amounts, that are included in the
comparable measure calculated and presented in accordance with GAAP in
the statement of operations or statement of cash flows; or (2)
includes amounts, or is subject to adjustments that have the effect
of including amounts, that are excluded from the comparable measure
so calculated and presented. We believe that the non-GAAP financial
metrics that we use are helpful in understanding our operating
performance from period to period and, although not every company in
the wireless communications industry defines these metrics in
precisely the same way, we believe that these metrics as we use them
facilitate comparisons with other wireless communications providers.
These metrics should not be considered substitutes for any
performance metric determined in accordance with GAAP.

Gross additions represents the number of new prepaid customers who
activated an account during a period, the number of new or existing
postpaid customers who entered into a new long-term contract (rather
than an extension of an existing contract) and, effective this
quarter, the number of new Broadband2Go customers who activated a
broadband device, unadjusted for churn during the same period. Note
that new Broadband2Go customers are included in gross additions
regardless of whether or not they were also counted, concurrently or
previously, as a gross addition to one of our voice offers. In
measuring gross additions, we exclude returns, customers who have
reactivated and fraudulent activations. Returns include "remorse
returns" for our postpaid offers, within 30 days of activation,
retailer returns for our prepaid offers, with the timing dependent on
the retailer's policy, and retailer returns for our Broadband2Go
device, with the timing dependent on the retailer's policy. These
adjustments are applied in order to arrive at a more meaningful
measure of our customer growth.

Churn is used to measure customer turnover on an average monthly
basis. Churn is calculated as the ratio of the net number of customers
who disconnect from our service during the period being measured to
the weighted average number of customers during that period, divided
by the number of months during the period being measured. The net
number of customers who disconnect from our service is calculated as
the total number of customers who disconnect less the adjustments
noted under gross additions above. These adjustments are applied in
order to arrive at a more meaningful measure of churn. The weighted
average number of customers is the sum of the average number of
customers for each day during the period being measured, divided by
the number of days in the period. For our prepaid offers, churn
includes those pay-by-the-minute customers who we automatically
disconnect from our service when they have not replenished, or
"Topped-Up," their accounts for 150 days, as well as those monthly
customers who we automatically disconnect when they have not paid
their monthly recurring charge for 150 days (except for such monthly
customers who are engaged in a retention program or who replenish
their account for less than the amount of their monthly recurring
charge and, according to the terms of our monthly plans, may continue
to use our services on a pay-by-the-minute basis), and such customers
who voluntarily disconnect from our service prior to reaching 150
days since replenishing their account or paying their monthly
recurring charge. We utilize 150 days in our calculation because it
represents the last date upon which a customer who replenishes his or
her account is still permitted to retain the same phone number. We
also have a "service preserver" option which allows customers to
extend the 150-day period to one year by replenishing their account
using an annual top-up. In this case, we will automatically
disconnect their service if an additional top-up is not made within
415 days of the qualifying annual top-up. For our postpaid offers,
churn includes those customers who either disconnect from our service
voluntarily or whose service we disconnect for nonpayment. These
calculations are consistent with the terms and conditions of our
service offering. Going forward, churn will also include those
Broadband2Go customers who have not purchased a new data pack within
the previous 12 months, less the adjustments noted under gross
additions above. We believe churn is a useful metric to track changes
in customer retention over time and to help evaluate how changes in
our business and services offerings affect customer retention. In
addition, churn is also useful for comparing our customer turnover to
that of other wireless communications providers.

Net customer additions and end-of-period customers are used to
measure the growth of our business, to forecast our future financial
performance and to gauge the marketplace acceptance of our offerings.
Net customer additions represents the number of new prepaid customers
who activated an account during a period, the number of new or
existing postpaid customers who entered into a new long-term contract
(rather than an extension of an existing contract) and the number of
Broadband2Go customers who activated a broadband device, adjusted for
churn during the same period. End-of-period customers are the total
number of customers at the end of a given period.

Adjusted EBITDA is calculated as net income (loss) plus interest
expense-net, income tax expense, tax receivable agreements expense,
depreciation and amortization (including the amortization of
intangibles associated with our acquisition of Helio), write-offs of
property and equipment, non-cash compensation expense, equity issued
to a member, debt extinguishment costs and expenses of Bluebottle USA
Investments L.P. prior to the completion of the IPO. Effective this
year, it is no longer necessary to exclude non-controlling interest,
or minority interest, given that it is excluded in the redefinition
of net income, included in Statement of Financial Standards No. 160,
Noncontrolling Interests in Consolidated Financial Statements. This
redefinition has been applied retrospectively for presentation
purposes. Although the items excluded from Adjusted EBITDA are all
necessary elements of our cost structure, they are customary
adjustments in the calculation of supplemental metrics. We believe
Adjusted EBITDA is a useful tool in evaluating performance because it
eliminates items which do not relate to our core operating
performance. Adjustments relating to interest expense, income tax
expense, depreciation and amortization and write-offs of fixed assets
are each customary adjustments in the calculation of supplemental
measures of performance. We also exclude tax receivable
agreement-related expenses for payments to the Virgin Group for the
utilization of net operating loss carryforwards, and to Sprint
Nextel, for the increase in tax basis that will be allocated to us,
as we consider them to be the functional equivalent of paying taxes.
We believe that the exclusion of non-cash compensation expense
provides investors with a more meaningful indication of our
performance as these non-cash charges relate to the equity portion of
our capital structure and not our core operating performance. The
expenses of Bluebottle USA Investments L.P. also do not relate to our
core operating performance and are, therefore, excluded. We believe
that the exclusion of equity issued to a member and debt
extinguishment costs is appropriate because these charges relate to
the debt and equity portions of our capital structure and are not
expected to be incurred in future periods. We believe such adjustments
are meaningful because they arrive at an indicator of our core
operating performance which our management uses to evaluate our
business. Specifically, our management uses Adjusted EBITDA in their
calculation of compensation targets, preparation of budgets and
evaluation of performance.

We believe that analysts and investors use Adjusted EBITDA as a
supplemental measure to evaluate our company's overall operating
performance and that this metric facilitates comparisons with other
wireless communications companies. However, Adjusted EBITDA has
material limitations as an analytical tool and should not be
considered in isolation, as an alternative to net income, operating
income or any other measures derived in accordance with GAAP, or as a
substitute for analysis of our results as reported under GAAP. The
items we eliminate in calculating Adjusted EBITDA are significant to
our business: (1) interest expense-net is a necessary element of our
costs and ability to generate revenue because we incur interest
expense related to any outstanding indebtedness, (2) to the extent
that we incur income taxes, they represent a necessary element of our
costs and our ability to generate revenue because ongoing revenue
generation is expected to result in future income tax expense, (3)
depreciation and amortization are necessary elements of our costs,
(4) write-offs of property and equipment eliminate non-productive
assets from our balance sheet, reconciling it to our earnings, (5)
tax receivable agreements expenses are the costs related to our tax
receivable agreements, as they are reimbursements to the Virgin
Group, for the utilization of net operating loss carryforwards we
received as part of the IPO, and to Sprint Nextel, for the increase in
tax basis that will be allocated to us, (6) non-cash compensation
expense is expected to be a recurring component of our costs which
may allow us to incur lower cash compensation costs to the extent
that we grant non-cash compensation, (7) expense resulting from
equity issued to a member represents an actual cost relating to a
prior contractual obligation, and (8) expenses associated with
Bluebottle USA Investments L.P. prior to the IPO is a non-recurring
component of our cost. Furthermore, any measure that eliminates
components of our capital structure and the carrying costs associated
with the property and equipment on our balance sheet has material
limitations as a performance measure. Because Adjusted EBITDA is not
calculated in the same manner by all companies, it may not be
comparable to other similarly titled measures used by other
companies.

Adjusted EBITDA margin is used to measure our Adjusted EBITDA
performance relative to our net service revenue so that we can gauge
the performance of Adjusted EBITDA normalized for the changing scale
of our business. Adjusted EBITDA margin is calculated by dividing
Adjusted EBITDA by our net service revenue.

The following table illustrates the calculation of Adjusted EBITDA
and Adjusted EBITDA margin and reconciles Adjusted EBITDA to net
income which we consider to be the most directly comparable GAAP
financial measure.

ARPU is used to measure and track the average revenue generated by
our customers on a monthly basis. ARPU is calculated as net service
revenue for the period being measured divided by the weighted average
number of customers for that period, further divided by the number of
months in that period. The weighted average number of customers is
the sum of the average customers for each day during the period being
measured divided by the number of days in that period. ARPU helps us
to evaluate customer performance based on customer revenue and to
forecast our future service revenues.

The following table illustrates the calculation of ARPU and
reconciles ARPU to net service revenue which we consider to be the
most directly comparable GAAP financial measure.

CCPU is used to measure and track our costs to provide support for
our services to our existing customers on an average monthly basis.
The costs included in this calculation are our (1) cost of service
(exclusive of depreciation and amortization), excluding cost of
service associated with initial customer acquisition, (2) general and
administrative expenses, excluding Bluebottle USA Investments L.P.
general and administrative expenses prior to the IPO, non-cash
compensation expense and write-offs of property and equipment, (3)
restructuring expense, (4) net loss on equipment sold to existing
customers, (5) cooperative advertising in support of existing
customers and (6) other expense (income), excluding tax receivable
agreements expenses, debt extinguishment costs and Bluebottle USA
Investments L.P., prior to the IPO. These costs are divided by our
weighted average number of customers for the period being measured,
further divided by the number of months in the period being measured.
CCPU helps us to assess our ongoing business operations on a per
customer basis, and evaluate how changes in our business operations
affect the support costs per customer. Given its use throughout the
industry, CCPU also serves as a standard by which we compare our
performance against that of other wireless communications companies.

The following table illustrates the calculation of CCPU and
reconciles total costs used in the CCPU calculation to cost of
service, which we consider to be the most directly comparable GAAP
financial measure.

CPGA is used to measure the cost of acquiring a new customer. The
costs included in this calculation are our (1) selling expenses less
cooperative advertising in support of existing customers, (2) net loss
on equipment sales (cost of equipment less net equipment revenue),
excluding the net loss on equipment sold to existing customers,
write-offs of property and equipment and equity previously issued to
a member of Virgin Mobile USA, LLC, and (3) cost of service
associated with initial customer acquisition. These costs are divided
by gross additions for the period being measured. CPGA helps us to
assess the efficiency of our customer acquisition methods and
evaluate our sales and distribution strategies. CPGA also allows us
to compare our average acquisition costs to those of other wireless
communications providers.

The following table illustrates the calculation of CPGA and
reconciles the total costs used in the CPGA calculation to selling
expense, which we consider to be the most directly comparable GAAP
financial measure.

Free cash flow, a non-GAAP measure, is calculated as net cash
provided by operating activities less capital expenditures. Free cash
flow is an indicator of cash generated by our business after
operating expenses, capital expenditures and interest expense. We
believe this measure helps to (1) evaluate our ability to satisfy our
debt and meet other mandatory payment obligations, (2) measure our
ability to pursue growth opportunities, and (3) determine the amount
of cash which may potentially be available to stockholders in the
form of stock repurchase and/or dividends subject to the terms and
conditions of our Senior Credit Agreement. Given that our business is
not capital intensive, we believe this measure to be of particular
relevance and utility. We also use Free cash flow internally for a
variety of purposes, including managing our projected cash needs.

The following table illustrates the calculation of Free cash flow and
reconciles it to cash provided by operating activities, which we
consider to be the most directly comparable GAAP financial measure.

Adjusted earnings per share. The Company is presenting adjusted
earnings per share which excludes the amortization of intangibles
associated with the acquisition of Helio which occurred on August 22,
2008 as well as transition and restructuring expenses associated with
the acquisition of Helio, the outsourcing of IT services to IBM and
the workforce reduction taken in the fourth quarter of 2008.